Hardy Irish Souls Tiptoe Into Nation's Ghost Estates

Houses and apartments at the Belmayne Development in North Dublin. Buyers are starting to return to the market, drawn by deals.
Press Association

By

Quentin Fottrell

Updated Oct. 8, 2010 5:36 a.m. ET

Ireland's ghost estates are showing signs of life. These estates—housing developments built on speculation but left unfinished or partially occupied when the housing bubble burst in 2007—are an enduring symbol of Ireland's economic boom and bust.

But as prices drop, there is growing interest from buyers in those developments that have finally been completed and are ready for sale—even as Ireland's economy, housing market and banks remain in a precarious state.

While many people are angry here about the economic crisis and the government's recent announcement that €50 billion ($69.2 billion) will be needed in a worst-case scenario to prop up the nation's ailing banks—with one man driving a cement truck into the gates of the Irish parliament last week—some are taking advantage of fire sales, receivership sales and seemingly near-rock bottom prices.

Waltrim Grove is one of the ghost estates filling up with new souls. The development, in the seaside town of Bray, less than an hour south of Dublin, has 72 units: two- and three-bedroom apartments, plus duplex and townhouses.

Only 20 people lived at Waltrim Grove this time last year. Today, after a receivership sale, there are only a dozen units left on the market.

ENLARGE

Children looked through the door of a house for sale in one of Ireland's ghost estates.
Kim Haughton

One of the new residents is Colette Nkunda, who paid €220,000 for her Waltrim Grove apartment. Ms. Nkunda, originally from Rwanda, works with a nonprofit organization and has lived in Ireland since 1994. She was attracted here by the sea and the Wicklow mountains.

"In my life I've always been an owner of the house I've lived in and I don't like to rent," she says. She adds she would rather have her money in a house than in a bank. "The view is just magnificent from my apartment," she adds. "I can look at the Sugar Loaf mountain. It's so private here and the neighbors are very, very nice. They're not buying for renting anymore, they're owner-occupiers. There's a good sense of community. If others pay less, I don't care. I'm happy here."

"It's a lot better than it was 12 months ago," says Gemma Lanigan, manager of new homes at real-estate agent Douglas Newman Good, which is the sales agent for Waltrim Grove. "More banks are lending again, and where people really want to buy, they can buy."

The Irish housing bubble began to inflate back in the 1980s and 1990s when U.S. computer multinationals like Dell Inc. and Microsoft Corp. set up their European headquarters here, lured by increasingly low corporate tax and a well-educated, English-speaking work force. By the mid-2000s, Ireland was awash with high-tech and construction jobs. Hundreds of thousands of immigrants from countries like Poland and China, and returning Irish emigrants, came here in search of work and they needed homes, as did a whole generation of young professionals.

What started off as a need to house an increasingly prosperous population turned into a gold rush, as people jostled both to avoid being priced out of a soaring market and to buy houses as an investment. Average national house prices skyrocketed from €75,000 in 1996 to €311,000 at their peak at the end of 2006, according to the think-tank Economic and Social Research Institute, or ESRI, and Permanent TSB bank. They estimate the average price today is just over €200,000.

Banks lent billions of euros over the past 15 years to property developers to build homes on agricultural and industrial land rezoned for residential development. But after the housing crash of 2007, cranes gradually disappeared from skylines across the land, leaving an estimate of 620 housing developments either unfinished or with less than 50% of the units occupied, according to the National Institute for Regional and Spatial Analysis at the National University of Ireland, Maynooth. These developments have become known as ghost estates.

According to "A Haunted Landscape: Housing and Ghost Estates in Post-Celtic Tiger Ireland," a recent report by the institute, there is enough surplus housing and rezoned land to last over 10 years in some locations.

ENLARGE

Anger over bank bailouts propelled a protester to drive a cement truck last month into the gates of the Irish Parliament in Dublin.
AFP/Getty Images

Economists say that home-buying couples now spend a more sustainable 22% of their combined net monthly salary on mortgage repayments versus 48% during the property boom, due to both higher prices and interest rates at the time.

Today, many of those who bought homes in new developments are surrounded by building sites, unfinished roadways and concrete holes in the ground that would have been tennis courts or communal swimming pools in more high-end developments, or poor drainage systems that cause bad smells.

Some are in worse condition than others. Basic infrastructure has been a major problem for residents in the Silver Birches estate, County Longford. BCS Homes Ltd., the developer, has gone into liquidation.

The treatment plant was turned off late last year due to nonpayment of electricity bill, which caused a back-up in the sewer—and a smell—but the electricity has since been turned back on.

This is a long way from the developer's original vision. Jim Smyth, who was a director at BCS Homes, says, "We put our heart and soul into that estate. They're block-build houses with a stone finish, not timber-framed houses. We put in natural stone chimneys, oak finishes and porcelain tiles. We never skimped on that job. If we were trying to make a quick buck and run, we would have been out a lot faster—before the property collapse."

Mr. Smyth said 41 out of the 49 houses are completed and, to his knowledge, over 50% of the houses are now occupied.

"Progress is very, very slow in that case," says the liquidator Joe Gannon, a partner at Sligo-based Gilroy Gannon chartered accountants. "If that estate was finished off, there would be 49 fine houses."

Fintan McGill, from Longford-based real-estate agent Sherry FitzGerald McGill, is pessimistic. "Nothing is being sold and there's plenty more estates like this around Longford," he says. "I don't think you could raise money against a property there."

Irish housing prices fell 17% on the year in the second quarter versus a 19% fall in the first quarter, according to the ESRI, and are expected to ease further in the third quarter. Still, bargain-hunting house-buyers are willing to bet that prices are finally close to stabilizing and happy to take the plunge in those estates that have been completed or are nearing completion.

At current prices, it is also frequently as cheap to buy as it is to rent.

Steep price cuts can drive quick sales. At Carrickmines Green in Dublin's southern suburbs, the nationalized Anglo Irish Bank Corp. sold units this summer at a discount of over 50% to the original asking price. Three-bedroom duplexes were priced from €300,000; they would have cost around €675,000 at the height of the boom in 2006. Two-bedroom apartments started from €180,000, while one-bedrooms were €135,000 at starting prices.

The sale made national television broadcasts as nearly 2,500 people viewed homes in one weekend. The agents for the development took 84 deposits out of a total of 89 available units.

"A lot of people have been sitting on the fence for three years," says David Browne, managing director of real-estate agents HT Meagher O'Reilly in Dublin, which in June took over as the agent responsible for the sale of apartments at Carrickmines Green. "They're starting families, they simply don't want to wait any longer, and there is a limited supply in better locations. We don't have a big rental culture. A high percentage of the renters are foreign nationals or young people."

Michael Maslanka was one such renter. He was also one of the buyers during that busy summer weekend. The 26-year-old head of maintenance at a nursing home came to Ireland seven years ago from Poland and could not afford to buy an apartment. But last month, lured by low prices, he got his keys to his first home, a one-bedroom apartment.

Dublin's Luas tramline will soon be extended to Carrickmines from the city center, which Mr. Maslanka hopes will add value to his new home. Crucially, Carrickmines is not an unfinished estate with a plethora of problems. It's ready to move into.

Financially, it was a no-brainer. His apartment cost under €140,000 and his monthly mortgage repayments to ICS Building Society, a subsidiary of Bank of Ireland PLC, will be €560 per month—half of what he currently pays in rent in a similar development five minutes away from Carrickmines Green.

The one hurdle: getting financing. "It took seven months to get a mortgage," he says. "It's more difficult to get a mortgage than it would have been two or three years ago, but the prices were so mad then."

He is one of the luckier ones. Last year, nearly two dozen people lost their €20,000 deposit after Laragan Developments—the property firm behind Carrickmines Green—went into examinership. They were told that they would only get back about 1% of their original deposit.

There is interest farther outside of Dublin, too. Mr. Browne, of HT Meagher O'Reilly, says that since last November he has sold 47 two-bedroom apartments out of a total of 63 units at the completed Capella Court development in Newbridge, County Kildare, with an average price of €130,000 and average size of 790 square feet. "There's a huge amount of people in Ireland with cash," he says. "They're not putting their money into shares and they don't know what's going to happen with the banks."

He has noticed a subtle change in mood: "We have witnessed a significant improvement in relation to interest levels, viewing numbers, offers and sales compared to this time 12 months ago. While I don't believe the market has bottomed out completely we are seeing signs of stabilization."

On the Oakley Wood housing estate in Tullow, County Carlow, there are also signs of movement. Oakley Wood has a total of 60 houses with small wooden fences and lawns to the front. Tullow is over an hour from Dublin and was an emerging commuter town during Ireland's economic boom. The detached and semi-detached houses for sale range in price from €147,500 to €229,950.

Matthew Conry, a real-estate agent with the Carlow-based Dawson agency, says 12 units on this ghost estate have recently sold through joint agents Dawson and Hooke & MacDonald.

"They're selling slowly to mostly first-time buyers," he says. "The last two to three months have been way better than the last 24 months. People are back looking at houses and they're buying again. Maybe they think prices are starting to bottom out and they see value."

There has long been a culture of home-ownership in Ireland, picking up during the middle of the last century. By the 1980s, renting was widely regarded as something Continental Europeans did. "The shift from renting to home ownership was largely done because it made economic sense," according to Tony Fahey, professor of social policy at University College Dublin.

The sheer scale of supply is evident in the figures. Home ownership increased in absolute terms to 1.09 million in 2006 from 794,000 in 1996, Mr. Fahey says, but as a share of total homes it declined to 75% in 2006 from almost 80% in 1996.

But many consumers are still nervous about falling house prices, further wage and job cuts and the prospect of higher interest rates and further tax hikes. The government is buying billions of toxic assets from banks and created the National Asset Management Agency, or NAMA. The agency is currently in the process of buying property loans from banks with a book value totaling €73.4 billion for an expected discount cost of just €30.5 billion. Taxpayers—many of whom face negative equity of 35% to 50% on their own homes—and their children will be picking up the bill.

"While historically there has been a massive preference for home ownership, the recent crisis will have dampened enthusiasm, at least for the immediate future," says John FitzGerald, economist with ESRI, the think tank.

Very few homeowners saw the crash of 2007 coming and sold their properties. Paul Henry O'Neill, a Dublin-based lawyer, did. Mr. O'Neill bought his home in the postcode of Dublin 4, an exclusive area minutes from the city center, in 1997 and sold it in 2003, making a hefty 80% profit. He deposited the difference in a U.K. building society. "As far as I was concerned the property rush was utter insanity," he says. "I don't have a penny in a wholly owned Irish financial institution and I have no confidence in the state weathering the storm."

He credits his single status as one of the reasons he didn't feel under pressure to upgrade. He jokes: "I didn't have a nagging wife. It's middle class Dublin syndrome to always want to move to a bigger and better house."

To understand the national obsession with house-buying, one must go back to Irish schools where history books drummed into generations of children the importance of home-ownership. During British rule in the 19th century, Ireland was effectively a nation of tenants. At that time, the Tenant Right League had a mantra of the "three Fs": fair rent, fixity of tenure and free sale allowing tenants to be compensated for improvements they made to their farm if it changed hands.

For him, low prices have removed the feeling of risk. Mr. Murphy bought the show apartment at Capella Court in Newbridge, County Kildare. He got it for €155,000, including a parking space and fixtures and fittings, at about half the original list price.

Mr. Murphy works for John Sisk & Son building contractors in Baldonnel, Dublin, about 30 minutes by car from his home. "It's a nice estate. It's quiet and kept clean. I could never see this apartment losing value."

Crucially, his monthly mortgage repayment is only €70 more than his share of the house he rented with five friends. "I come from a large family of eight, so this was a real opportunity to live on my own," he says. Mr. Murphy says he hasn't experienced any resentment from the few residents on his estate who bought at the original price. "They're actually happy to have people here. They feel more secure. It looks better too. There's safety in numbers."

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